The fire that burned down Tony Rekhi's wine and liquor store in San Mateo, California, in 2006 might have been the best thing that ever happened to him—despite a huge financial loss. It certainly had a major impact on internet wine sales. This is all the more curious since, in the beginning, Rekhi had no interest in selling wine at all.
"When I arrived in the U.S. in 1989," Rekhi recalls, "I had a masters in engineering, an M.B.A., and an LL.M which is a masters in law. I figured there would be no problem for me; I could do anything. But I was in for a shock."
The U.S. economy was in a recession, and Rekhi couldn't get a high tech job. Worse yet, in order to get a job in law he'd need to pass a tough licensing exam, and that would take more time than he had. His only hope was his M.B.A. degree.
"My brothers were already in business," he says. "They owned a big liquor store in San Mateo, about 16,000 square feet. So I joined them in the business in 1989. In 1990 we installed scanners, so people could find out how much a bottle of wine cost. Then, in 1995 we put up a web site, but not for internet business, just to bring people into the store.
"I had a high-tech engineering background, so naturally we introduced computers in our business—initially for point of sale, tracking inventory, sales records, and accounting purposes. Later we put in computer terminals on the sales floor and introduced our database of wines and liquors to our customers. We included tasting notes, ratings, and food pairing to help customers learn all about items of their interest and help them make a buying decision. We were the first wine store in California to go with computers.
Shortly after that, Rekhi realized that he could do a lot more with the internet than merely posting a catalog online. Ecommerce was starting to become an important commercial platform, and he saw a way to jump on that train before it left the station.
"In 2000 we started working fiercely to use ecommerce," Rekhi says, "and boost our internet business. We started out on a different platform, and we had big problems. Several times it broke down, and system glitches put us off-line for extended periods. There were issues with charge cards too. In 2001 we moved our ecommerce business to Yahoo—and we have been with Yahoo ever since. No problems."
In 2004 the Wall Street Journal rated WineGlobe.com one of the top ten online wine stores in the U.S.A.—praising its customer service, selection, and price. Only two online wine stores in California made that list: K&L and WineGlobe.com. That helped a lot—as did GQ Magazine, ranking WineGlobe in their top five. The business was doing well, growing between 10 and 30 percent each year.
Then Rekhi had a shock. "In 2006 our store burned down," he says. "It was just as we were getting ready for the holidays. But what could we do? At first we fulfilled orders from my home. Then we found a new place for the warehouse, and since we already had a lot of business on the internet we brought all our customers onto the ecommerce platform. It was a blessing in disguise. We did more business in 2006 than we had in any year before that—and we were doing 100 percent of that business on the internet. We were able to cut our staff in half. No more walk-in store."
The fire wasn't the only challenge WineGlobe had to surmount. There were all the deadbeats—a problem even the best ecommerce platform could not prevent.
"The first year we were doing significant ecommerce business," Rekhi remembers, "we had $45,000 charged back. Big fraud. And the credit card companies refused to pay. They blamed us for shipping to people without verifying their bona-fides. It's difficult to ascertain on the internet if a customer is planning fraud. We learned a lot from that experience. And now we don't lose more than a couple of hundred dollars in a year."
What's the trick?
"When we get an order, the credit card company verifies the address, the credit card number, and so on. But we go one step further. If a customer has not bought from us before, we call him to verify if the credit card has been stolen or if somebody else is using it. Second, if someone is buying the wine as a gift to someone else, we contact both parties to make sure they know about the charge on the card. If someone orders a $35 bottle and wants overnight shipping, which costs $75 to $80 dollars, it makes us alert. And when you contact the customer nobody picks up, and they don't reply to emails. Those are the kinds of orders that make us suspicious. We cancel those orders."
WineGlobe's most popular items are high-end wines and liquor—the kind you won't find in your corner grocery. "We specialize in old wines, aged wines," Rekhi says. "We have a big collection of those wines—and we don't buy any wine without tasting it first. We visit wineries; sometimes wineries bring wines to us. And if we don't like it, we don't sell it. We don't bother with low-end wine, because why would someone pay shipping charges for something they can buy in the local grocery? Our business is built on premium wines."
Not just wine either. DoesBlack Maple Hill Oregon Straight Bourbon Whiskey sound good? Only $120 for a 75 ml bottle. Courvoisier XO Cognac: $190 for 750 mls, and a bargain at the price considering it's been voted Best Cognac in the World. A fascinating note tells you the difference between Armagnac and Cognac. In fact, the extensive and amusing notes on all their wines, beers and liquors makes this site a great place to brush up your inner sommelier. And don't forget the Rum of the Month Club.
Shipping wines from one state to another has always been problematic for online stores, and WineGlobe is no exception. Rekhi still can't ship wine to New Hampshire, Massachusetts, and a few other states. Check the web site for details.
WineGlobe isn't the biggest wine shop on the ecommerce platform, but Rekhi is still very proud of it. "When you compare us to wine.com, they have $400 million funding," he says. "Same thing with BevMo. They have about $200 million funding. Those are big operations! And well-established. Whereas we started our business from our own money. Compared to them, we are new-comers to the wine business, and a lot smaller. But we set an example for these people. We were the first to go on the internet; they all followed us."